3 ways Brexit uncertainty could affect your scaling SME
No doubt you’ve heard of Brexit, but how will it actually affect your business? Nicholas Harding is CEO of Lending Works, an up-and-coming peer-to-peer lending platform. As the head of a young company, he knows just how impactful Brexit can be to SMEs. In this article he will outline the challenges they are likely to face in the run up to deadline day, as well as the transition period afterwards.
SMEs have had a lot of challenges to overcome in recent years. The government increased taxes and business rates in 2017 and introduced General Data Protection Regulation (GDPR) in 2018, both of which have already affected a lot of unprepared businesses. Now, those SMEs are having to deal with how Brexit is affecting their trade.
Whatever your political view, we can all agree that the main problem with Brexit is not so much leaving the EU itself but all the uncertainty around it. From no-deals to a lack of information about what will actually change after 31st October 2019, assuming that's even when we leave, it’s impossible to be fully prepared if we don’t know what we’re preparing for.
What we do know is that for an indeterminate amount of time after the Brexit deadline, there will be changes to business rates, regulations, and costs. These will have a knock-on effect on everything from supply chains to business relationships.
Below, I’ll be explaining in more detail how Brexit is expected to affect key areas of your business to help you prepare as best you can.
Finance and funding options
Many businesses have been impacted by the fluctuating value of the pound already, as they’re not getting as good a deal as they could be when importing and exporting. With the pound expected to plummet further after the deadline, even just temporarily, this could cause big problems for SMEs who don’t have the same financial stability, cash reserves, and resources to fall back on as more established businesses.
Brexit will also mean the loss of various EU funding schemes for Britain’s SMEs, which means that many of them will be competing for the same pool of lenders post-Brexit. This is likely to result in restricted lending to small businesses due to market turmoil, and many SMEs are turning to crowdfunding and funding competitions for support instead.
Importing and exporting goods and talent
After Brexit, all businesses will be expected to pay VAT upfront on goods imported from EU, including extra duty tax. Scaling SMEs are unlikely to have money spare to pay these new costs, so they’ll have to look elsewhere to source their parts and products. While this is seen as good news for UK manufacturers, it could mean disruptions to trade while SMEs hunt down new suppliers, compromising customer loyalty as a result.
Many SMEs are also concerned about how restricted freedom of movement within the EU may prevent them from recruiting the right talent. Skill shortages, particularly when it comes to digital skills, could impact their productivity and quality of service. Plus, existing migrant workforces could choose to leave for more stability and better prospects abroad.
Culture and confidence
More than anything, Brexit could affect our confidence and how we are seen by other countries, which can have a major effect on international business relationships. Some SMEs have already noticed that other countries can be more cautious to do business with a company from Britain due to the uncertainty around Brexit.
People in Britain might be more tentative about starting a business in the current economic climate and the economy may suffer as a result, at least for a time. Many existing SMEs are actively cancelling or postponing their plans, delaying growth, and some are even planning on leaving Britain to get better support and funding abroad. So, it’s understandable that British entrepreneurs could be disheartened.
For better or for worse, these are just some of the ways that Brexit uncertainty could affect your SME. However, it’s important to remember that every business is different. Keep yourself informed of the latest developments and work out what preparations you need to take to keep your SME afloat. If you do, the transition period after Brexit won’t necessarily be difficult.
By Nicholas Harding, CEO, Lending Works.